Previously owned property

My client was cold called by an estate agent 2 years ago who offered to buy her house and let her rent it back.  She had a lot of consumer debt at the time, so she agreed - (she now agrees she did not take proper advice.)  After a great deal of fuss about where the pitiful amount she got for home went, she is now on Guaranteed Pension Credit.  However, she has been refused Housing benefit because this was a property she previously owned, and she was not at risk of losing it. 

She wants to move to social housing - a bungalow - as she is severely disabled (DLA HC and HM) .  She is struggling with the rent, but just about pays each month.  He landlord wants her to move, and has threatedned a section 21 to move along the Concil - Telford.  However, the Council are now saying that even if she moved to another property, she could still not claim HB until the 5 years is up - in about 3 years time.  is this correct - that the 5 year rule passes onto to the new property?

No its wrong. The provision is in reg of the HB regs and says a claimant is not treated as laible to pay rent where “he previously owned…..the dwelling in respect of which the liability arises”. Since she will not have owned the next property she rents it will not apply to the new liability.